What are IRS 1095 Forms?
When any business, no matter how small, hires their first employee, they enter a world full of complicated and confusing IRS forms and payroll taxes. Hiring should be a time for focusing on growing your business, and by getting your payroll ducks in a row ahead of time, it can be.
The problem is, there aren’t a lot of resources out there that actually make it easy (or at least comprehensible) for small businesses to navigate all the complexities and responsibilities that come with becoming an employer.
That’s why we put together this guide, among others—to help simplify and explain the world of payroll, forms, and taxes to new employers.
In this guide, we’re covering 1095 forms, those introduced by the Affordable Care Act (ACA) that deal with health insurance coverage. We’re talking about:
- What 1095 forms are
- Why employers are required to file them
- How to figure out if you need to file a 1095 form
- When and how to fill out and file 1095 forms
What are 1095 forms?
If you’re in a rush, here’s the gist:
- What’s reported on 1095 forms: Health insurance coverage
- When they’re filed: Annually
- Who needs to file: Any employer who provides coverage for employee health insurance
1095 forms are a group of documents introduced by the Affordable Care Act (ACA) in 2014, and they include forms 1095-A, 1095-B, and 1095-C. Under the ACA, employers and health insurance providers are responsible for submitting the relevant 1095 form annually, and they help the federal government determine:
- Whether or not individual employees were eligible for health insurance coverage
- During which months of the year they held coverage
- Whether they received or were eligible for an advanced premium tax credit
What is Form 1095-B?
Form 1095-B is one of the 1095 forms used to verify individuals have health insurance that provides (at least) Minimum Essential Coverage (MEC) throughout the year. Form 1095-B includes information on the type of coverage, period of coverage, and any dependents covered by employer-provided health insurance plans.
It’s filed and provided to employees of small employers (fewer than 50 full-time employees), among other entities, who offer health insurance. It’s also filed by:
- Private insurance companies outside the Marketplace
- Government agencies (like Medicare and CHIP)
- Other coverage providers
What is Form 1095-C?
Form 1095-C is similar to 1095-B—it reports on the health insurance coverage offered by employers and details whether or not employees participated in that coverage, for each month of the year. The difference is that Form 1095-C is used by larger employers (those with 50 or more full-time employees).
If you’ve been employed by a company with more than 50 employees since the Affordable Care Act took effect, this is likely the form you would’ve received. It lets the federal government know if an individual had any gaps in coverage and whether they’re liable for paying the individual shared responsibility payment (also referred to as the individual mandate).
How are forms 1095-B and 1095-C different from Form 1095-A?
The primary difference between forms 1095-B, 1095-C, and 1095-A comes down to who files and sends each.
Form 1095-A is less applicable for small businesses and employers because it’s only sent out by the Marketplace. The form includes much of the same information as the other two variations, but it’s sent only to individuals who enrolled in health insurance coverage through the public healthcare Marketplace. The purpose of the form is to confirm coverage and dates and to determine whether an individual received or was eligible for an advanced premium tax credit.
That said, if you’re self-employed and buy your health insurance coverage through the Marketplace, you should expect to receive Form 1095-A.
Why employers are required to file 1095 forms
Employers and other health insurance providers are required to file 1095 forms as a result of the introduction of the Affordable Care Act (ACA)—which was passed on March 23, 2010. Under the ACA, all eligible individuals were required to hold Minimum Essential Coverage (MEC) throughout the year.
When individuals choose not to get health insurance coverage (with exemptions for accessibility, affordability, and other factors), they pay a penalty called the “individual shared responsibility payment” (often called the “individual mandate”). The penalty is based on the individual’s income, time spent without coverage, and other factors.
The federal individual mandate was repealed for tax years 2019 and later—however, some states still require individuals to hold coverage or pay a penalty.
1095 forms let the government know which employees are liable for paying the individual shared responsibility payment.
Do I need to submit a 1095 form?
1095 forms aren’t the kind of payroll form that every employer needs to file—so you might be wondering how to tell if you are required to. In brief, employers must file either Form 1095-B or 1095-C if:
- You had at least one full-time W-2 employee during the prior year AND
- You provided self-insured health insurance coverage to employees
If you’re required to file one of the 1095 form variations, you must send a copy to both the IRS and each employee.
If your business employs more than 50 full-time (or full-time equivalent) employees, then you, the employer, are required to file 1095-C forms for each employee—even those who declined coverage.
When it comes to Form 1095-B, though, there’s an important distinction to be made between health coverage “providers” and “sponsors.”
- A sponsor is whoever arranges the health coverage. For example, if somebody receives health coverage through their job, the employer is considered the sponsor.
- A provider is a company or organization that actually pays the medical bills themselves
- In most cases the provider would be an insurance company, in which case the insurer must send out the 1095-B form.
- Additionally, a self-insured employer is both a sponsor and a provider; and in that case, the employer would send out the 1095-B.
So if you and your employees pay premiums to an insurance company, that company is the provider and, therefore, responsible for sending out 1095-B forms to your employees. However, if you choose to self-insure—meaning, instead of premiums, you pay employees’ medical bills yourself—then you are the provider. In the latter case, you are responsible for filing and sending out 1095-B forms.
Which 1095 form should I file?
In short, if you employ fewer than 50 full-time employees, and provide them with self-insured health insurance coverage, then you should file Form 1095-B. This variation of the form is used by smaller employers and other health insurance providers.
While employers with fewer than 50 full-time employees aren’t always required to offer health insurance coverage, offering coverage can help you be more competitive in hiring and can offer some tax benefits when you file.
If you employ more than 50 full-time employees, you are required by law to both provide Minimum Essential Coverage (MEC) and to file Form 1095-C.
How to fill out 1095 forms
Now that you know whether or not you need to file a 1095 form, let’s talk about the how and when of filing. Before you fill out 1095 forms, you’ll need to have the following information on hand:
- Your own company details (trade name, employer identification number or EIN, etc.)
- The insurance company who provided the coverage
- The name of each employee on your insurance policy
- Names of each person (including dependents) covered under the policy
- The months during which each person was covered
The other good news is that, once you have the right info at the ready, 1095 forms are exceedingly simple to fill out. All you need to do is fill in the employee and their dependents’ information and check the box for each month they held coverage with you.
Filing 1094 forms
Before we move on, let’s talk briefly about 1094 forms. Form 1094-B and Form 1094-C are “transmittal” forms—essentially cover sheets that employers and health insurance providers must use when filing their accompanying 1095 forms. In essence, they detail the employer’s information and contact, as well as how many employees were covered and how many 1095 forms you’re filing.
When to submit 1095 forms
IRS Forms 1095-B and 1095-C are both annual filings. That means employers and health insurance providers who are required to submit 1095 forms are only required to do so once per year. For the vast majority of businesses, these forms are due to employees by February 28th, and also due to the IRS by February 28th (if filing on paper) or March 31st (if filing electronically) of each year.
How to submit 1095 forms
When the time comes to submit the applicable variation of Form 1095, employers have a few options to choose from:
- E-file online
- Mail in your form
- Work with an account to file for you
- Any combination of the above
This is the method of filing that the IRS prefers. According to them, it’s
- More accurate
- More secure
In order to file Form 1095 (or another IRS form) online, you’ll need to either use tax software or work with a tax professional who’s an authorized e-file provider. The IRS put together lists of approved software and authorized e-file providers to help you choose.
Mail in your form
Small businesses and employers also have the option to mail in Form 1095. (Note: If filing on paper, you’ll need to meet the earlier deadline of February 28th.)
To do so, you’ll need to print the applicable Form 1095. You’ll mail this, plus the applicable 1094 form, to the corresponding address for your state. You can find the correct mailing address on page 4 of the Instructions for Form 1095-B or pages 3 and 4 of the Instructions for Form 1095-C.
Work with an accountant to file for you
Your last, and often best, option for filing 1095 forms is to work with a tax professional or CPA. Tax professionals can both fill out and file any necessary variation of Form 1095 and will also fill out and file the applicable 1094 form.
We covered a lot about health insurance and IRS forms today. To sum up, here are the main points employers large and small need to be mindful of:
- 1095 forms report the health insurance coverage employees are offered, the dependents and levels of coverage, and the months during which individuals held Minimum Essential Coverage (MEC) according to the Affordable Care Act (ACA).
- All employers with more than 50 full-time employees (or full-time equivalents) must provide MEC and file Form 1095-C annually.
- Employers with fewer than 50 full-time employees, who provide self-insured coverage, must file Form 1095-B annually.